Important Communication from CLAC: Two Significant Bills Introduced Impacting HOAs in Colorado
The following communication from CAI's Colorado Legislative Action Committee (CLAC) has been sent to CAI members in Colorado on the introduction of bills addressing manager licensure and HOA debt collections. In addition to future communications from CLAC, stay tuned to this blog for important updates on these significant bills as they proceed through the legislative process.
Two Significant Bills Introduced Impacting HOAs in Colorado
House Bill 13-1277; Community Association Manager Licensure
Representative Angela Williams (D – Denver), Chair of the House Business, Labor, Economic and Workforce Development Committee, has just introduced House Bill 13-1277 (HB 1277) in the House of Representatives to require the licensure of community association managers and designated executives of management companies in Colorado. Senator Morgan Carroll (D-Aurora), the Senate Majority Leader, is the primary sponsor of the bill in the Senate. This bill will begin in House and is assigned to the Business, Labor, Economic and Workforce Development Committee.
Through a licensure program, the purpose of HB 1277 is to ensure the competency of community association managers and management company executives who are responsible for the direct supervision of managers. While CAI’s Colorado Legislative Action Committee (CLAC) submitted an application (which included a recommendation for a licensure program) to the Colorado Department of Regulatory Agencies (DORA) last year to determine whether the licensure of community association managers was necessary, HB 1277 was not drafted by CLAC but does include many of our recommendations.
Here are some of the highlights of the bill as originally introduced:
● Beginning on July 1, 2014, community association managers and management company executives who directly supervise managers will be required to be licensed in Colorado.
● The CMCA credential, AMS designation and PCAM designation are recognized in the bill as the foundation for the license. In addition to holding the CMCA credential or one of the designations, managers will be required to complete a course and pass an examination relating to applicable Colorado law. While the examination provisions in the bill are confusing and in need of clarification, this is our understanding of the intent of the bill and we expect an amendment will be introduced to clarify the testing provisions.
● Managers will be required to submit to and pass a criminal background check prior to being issued a license.
● The Division of Real Estate will have jurisdiction to discipline licensed managers and management company executives required to hold a license.
CLAC and the Manager Licensure Taskforce (Taskforce) are fully engaged on HB 1277. In taking a position on the bill, CLAC and the Taskforce must apply CAI’s Community Association Manager Licensing Policy which is summarized by CAI National as follows:
“CAI encourages the national certification of community association managers. In states that propose mandatory regulation of community association managers, CAI will support a regulatory system that incorporates adequate protections for homeowners, mandatory education and testing on fundamental management knowledge, standards of conduct and appropriate insurance requirements. CAI opposes the licensing of community association managers as real estate brokers, agents or property managers.”
Now that HB 1277 has been introduced, CLAC will review this legislation and vote to determine what position we will take on the bill. Based upon the position CLAC takes on HB 1277, the Taskforce will take the lead on actively working the bill in the House and Senate. In addition, you can expect regular updates from the Taskforce on the position CLAC has taken on the bill and the status of the bill with strategically timed and tailored “Calls to Action.” Since grassroots action must be coordinated to be effective, we ask that you hold off on contacting legislators on the bill until you receive an email request from the Taskforce.
House Bill 13-1276; HOA Debt Collection Limitations
In addition to the introduction of HB 1277, Representative Williams and Senator Carroll are also the primary sponsors of HB 13-1276 (HB 1276) which addresses the issue of debt collections in HOAs. Senator David Balmer (R-Centennial) has joined Senator Carroll as a co-primary sponsor of the bill in the Senate. Like the manager licensure bill, HB 1276 will start in the House and is assigned to the Business, Labor, Economic and Workforce Development Committee.
Based upon constituent complaints received by legislators and complaints to the HOA Information Office, we have been told the purpose of the legislation is to: (1) de-escalate the scorched earth perception that HOAs immediately resort to foreclosure when small delinquencies are at issue; and (2) create a debt collection process which provides a real world solution that encourages a one-time payment plan option for delinquent owners without waiving HOA rights.
Obviously, CLAC was not the author of this legislation. However, understanding the likelihood that some version of this bill will pass the legislature and be signed into law, CLAC has been engaged in negotiations with the sponsors to reach a balanced and reasonable solution to the concerns relating to the collection of past due assessments. As originally drafted, the bill in part would have subjected volunteer boards, managers and management companies to the Colorado Fair Debt Collection Practices Act. However, the sponsors of the legislation were open to alternative approaches and the bill has undergone significant changes prior to introduction. Here are a few highlights of the bill as introduced:
● HOAs are not permitted to refer delinquent accounts to a collection agency or legal counsel for action unless they have adopted and comply with a Collections Policy with specified minimum provisions.
● As part of the Collections Policy, homeowners must be provided with notice of the delinquency and be informed that if the delinquency is not cured within 30 days their account may be turned over to a collection agency or legal counsel for action.
● Prior to a delinquent account being turned over to a collection agency or a law firm for legal action, a homeowner has a one-time opportunity to enter into a 6 month payment plan (association boards may extend the time of this payment plan if they wish) with their association to cure the entire amount of the delinquency. If the homeowner defaults on the payment plan or fails to pay their current month assessments, the association may immediately proceed with other action to collect on the delinquency.
● HOAs may only proceed with foreclosure if the balance of the assessments and charges secured by its lien equals or exceeds six months of common expense assessments based on a periodic budget adopted by the association.
● The board of an HOA must take a formal vote to authorize proceeding with a judicial foreclosure. This duty to take a formal vote cannot be delegated to an attorney, insurer, manager or any other person.
In determining whether to support HB 1276, CLAC reviewed and applied CAI’s Effective Collection of Community Association Assessments Policy which is summarized by CAI National as follows:
“Community Associations Institute (CAI) encourages the creation and continuation of effective methods to ensure efficient, economic and successful association collection procedures. CAI opposes enactment of overreaching governmental limitation on effective collection of assessments, fees and other charges of community associations. CAI supports laws that strengthen such collection methods, provided collection methods are undertaken in a fair and reasonable manner, giving the affected owners notice, the opportunity to be heard and other due process protections.”
Based upon a review of this policy and the provisions of the bill, CLAC believes HB 1276 provides a fair and reasonable approach to the collection of delinquent assessments which is consistent with current best practices and has voted to support the bill as introduced.